EBA publishes guidelines for co-operation agreements between deposit guarantee schemes

The European Banking Authority (EBA) published guidelines on co-operation agreements concerning deposit guarantee schemes (DGSs) on February 15.

Under European Union (EU) law, DGSs must have written co-operation schemes in place with each other or, where relevant, with regulatory authorities. If a DGS cannot reach agreement with another DGS or with a regulatory authority, then under EU directive (2014/49/EU), either party may apply to the EBA for binding mediation.

Binding mediation between DGSs was a "challenging task" in the absence of clear guidelines for "a number of reasons", and the "cross-border nature" of many EU credit institutions meant there was a need for effective co-operation between different countries' DGSs and regulators, the EBA said.

EU law had only laid out "broad co-operation principles", while crucial concrete arrangements had been left to co-operation agreements, it said. Without guidance on these agreements, DGSs and regulatory authorities might "conclude very different agreements".

These agreements might not "contain the necessary elements to ensure smooth and legally safe co-operation at the point of failure", it said. This would "increase the likelihood of conflict" and make EBA mediation "particularly difficult", especially in emergencies.

The EBA's guidelines set out three major areas that must be covered by agreements. They must contain "modalities for repaying depositors by the host DGS" at branches of credit institutions which have their headquarters in other EU member states. They must also provide means for transferring contributions from one DGS to another if credit institutions switch guarantee schemes. Agreements must also have "modalities for mutual lending between DGSs".

The guidelines include "minimum core elements" of all three areas to be included in DGS co-operation models. These minimum elements do not prevent DGSs or regulators from including further provisions in their co-operation agreements, the EBA said. This approach should "strike the right balance" between the flexibility needed to deal with diverse DGS models and the need for "harmonisation and comparability".

To "avoid the signing of multiple detailed bilateral agreements between multiple DGSs within the EU", the authority said, the guidelines include a template for multilateral co-operation agreements.

The guidelines will be translated into all EU languages, after which competent authorities will have two months to report whether they comply, the EBA said. The guidelines will then enter into force six months after all the translations have been published.

The EBA's confidentiality policy means it does not comment on whether any DGSs have been part of a mediation process, an official spokeswoman said.

The guidelines had benefited from the work of the European Forum of Deposit Insurers (EFDI), which was working on a European standard for DGS co-operation agreements "with a narrower, albeit more detailed scope" and "addressed to a broader set of countries", the EBA said.